New Classicals 1, New Keynesians 0

All of these books, except for that by Paul Samuelson and William Nordhaus, are intermediate macro-economics texts. Each has distinctive merits. That by Andrew Abel, Ben Bernanke and Robert McNabb (ABM) is a European version of a successful text, while the others focus almost exclusively on the North American macroeconomy. Alan Auerbach and Laurence Kotlikoff (AK) use a simple two-period overlapping generations model to develop the macroeconomic theory. Roger Farmer offers the clearest presentation of many topics and excellent internet references. Richard Froyen's is better than most of the North American texts on international issues and gives a good presentation of recent monetary policy debates. Samuelson and Nordhaus is a classic and still sets the standard in this part of the textbook market. I shall focus on the intermediate texts.

Writing a textbook is never easy. Introducing and incorporating the new always presents a tricky problem and never more than in macroeconomics today because a lot has happened in the past 20 years. The so-called endogenous or new theories of growth have revitalised the field. The theory of unemployment and the business cycle has witnessed the engagement between the New Classicals and New Keynesians. And there have been important developments in our understanding of the inter-generational and strategic aspects of fiscal and monetary policy. So how well have these books met these challenges?

All these texts give growth some space, but somewhat surprisingly, the new developments are poorly represented overall. Farmer is the exception with a whole chapter. But Froyen has only a handful of pages, and AK and ABM manage not much more than a passing reference.

New Classical ideas are generally covered well, but not so the New Keynesians. The only New Keynesian idea that pops up in all is the analysis of price stickiness due to menu costs; and only ABM deals with this in any depth. AK is alone in discussing the influence of staggered price setting and the more general coordination aspects of the New Keynesian argument (and its treatment is brief). Likewise, but perhaps less surprising given its greater significance for Europe than the US, only ABM gives any kind of space to hysteresis.

AK and Farmer deserve a special mention for their discussion of the intergenerational aspects of fiscal policy. But only ABM treats the strategic aspects of policy setting in general, and monetary policy in particular, in any detail.

The more recent texts have an obvious advantage when making sense of how the "new" relates to the "old", simply because they start afresh. Farmer's is the only first edition under review and he does an excellent job of making the "old" and the "new" seem to be all of a piece. In comparison, while the blurb for Froyen tries to make a virtue of his "historical" approach, I do not think one can disguise the fact that this is the sixth edition. The basic structure of the book was created some time ago and the new developments sometimes seem like uncomfortable additions.

My impression, then, across these three areas is that, while all the books have moved to incorporate recent developments, none does a really comprehensive job. But what textbooks do? In favour of those under review here, all present the IS/LM model in a form that will be immediately recognisable to old hands (AK is a possible exception, as it derives these curves using the authors' workhorse overlapping-generations model).

The newness of Farmer also shows in its excellent set of web references: one, for example, is to an interview with Milton Friedman, another to a discussion in The Economist on pension reform, an OECD data base, a budget simulator, and so on. Farmer also has its own website and the usual set of instructor's manuals, test banks and PowerPoint slides. Froyen is the next best in this regard, but has no web references and no PowerPoint slides. For ABM, publishers Addison and Wesley invite the instructor to contact them for supplementary materials. AK apparently has none of the textbook condiments, but it is the only book with cartoons, which may or may not make you laugh.

Shaun P. Hargreaves Heap is senior lecturer in economics, University of East Anglia.